Superglass raised £8 million in new equity funding and secured £2 million in Regional Selective Assistance grants from Scottish Enterprise in the financial year to August 31, 2012.

The new funding related to a debt-for-equity swap with Clydesdale Bank to reduce its debts to around £5 million.

Superglass said in today's trading update, given current market conditions, “debt service obligations will be unsustainable”.

Superglass said debt amortisation payments are due to resume in November 2013 and the group is scheduled to repay £8.2 million of debt in aggregate over the three years to November 2016.

The board said it is now “considering all options” to strengthen its balance sheet, “including the potential for a further equity issue”.

It added: “It is likely that any refinancing measure would result in significant dilution to existing shareholders' equity."

Superglass said its financial problems have been compounded by the delay in the recent transition from CERT to Green Deal, which it said is “causing a major gap in activity within the retrofit market for both loft and cavity insulation”.

The company added: “Combined with abnormally low levels of housebuilding activity in the UK by historical standards, the net effect is a surplus of UK-based insulation manufacturing capacity and highly competitive market conditions, which in turn are detrimentally impacting the company's operating profits and cashflow.”

The Stirling-based company reported a further drop in margins in a trading update in January which it said was down to “extremely challenging” UK market conditions impacting average sales prices.

Last November, Superglass reported a 75 per cent slump in annual earnings to just £400,000, and has since then reported further rises in input and raw material costs.

The company stated in January its turnaround investment strategy, called Project Phoenix, “remains on budget and on track for completion during the first half of this year".

Last year Superglass updated the estimated cost savings from the Project Phoenix investment from £3.6 million to £5 million a year.

Explaining the adjustment, the company said: “The increase in savings is predominantly due to the installation of new fiberising technology which, as well as improving our cost base, is enabling us to meet the increasing demands of the marketplace in terms of competitive pricing, product quality and specification.”

Today, Superglass said the first full year of savings from the Project Phoenix drive is expected in 2013/14.

“Once these cost savings are factored in, the board's assessment is that Superglass can be strongly cash generative at the operating level in the future, even at current depressed market volumes and prices”.

Superglass said it expects government stimulus packages will “generate a gradual increase in UK housebuilding activity from 2014 onwards; and the current gap in retrofit activity should correct itself within a timescale of 6-12 months as the flagship Green Deal and ECO initiatives become fully operational.”

The company said it continued to operate within the terms of its current banking facilities announced in November 2012, and its bankers “continue to be supportive”.